5 top dividend stocks for your watch list

The S&P/ASX 200 (ASX: XJO) has risen by 15% so far in 2013. Many high-dividend-paying stocks have led the way with share price gains well over 20%, however the price gains have by no means been consistent across the board.

Despite heightened focus on so-called ‘income’ stocks, some stocks paying dividends above 7%, or even 8%, have been left behind. There are a multitude of reasons for this, however the following stocks should be on your watch list if you’re serious about income investing.

Metcash (ASX: MTS), 6.9% yield (9.4% grossed up): Grocery and hardware wholesaler Metcash has underperformed the ASX 200 by nearly 30% over the past 12 months and is now trading at a 5% discount to its share price 12 months ago.

Metcash is a grocery wholesaler to the independent retail network of IGA stores, and also operates Campbells Wholesale and C-Store outlets which service other small businesses such as the Lucky-7 chain. Metcash is forecast to lower the dividend payout to 22 cents, from 28 cents, however the underperformance of the share price should limit further downside.

SP AusNet (ASX: SPN), 6.8% yield (7.7% grossed up): SP AusNet owns a number of energy assets, including Victoria’s main high-voltage electricity transmission network and an electricity distribution network and a gas distribution network, both also in Victoria. In addition, it also owns an electricity metering and utility asset management services business targeting infrastructure owners. Around 90% of its revenue is regulated by the government and is therefore highly predictable. Its dividend per share is expected to continue rising in the years to come, along with gas and electricity prices with inflation.

Leighton Holdings (ASX: LEI), 5.9% yield (7.1% grossed up): Leighton has endured a tough year. The company’s share price appreciated rapidly at the start of the year, up over 40% in three months, before swiftly crashing back into the negatives by mid-year as claims of corruption and a slowdown in the Australian mining sector resulted in multiple broker downgrades. It’s now trading just 3% above where it started the year and still has a strong balance sheet. Leighton has $42.6 billion of work in hand, including  $8.7 billion of new work awarded during the third quarter of 2013.

Myer (ASX: MYR), 6.9% yield (9.9% grossed up): While Myer and rivals in the consumer discretionary retail sector have struggled to grow or even maintain earnings and profit, their share prices have seen strong gains after being oversold during 2012. Myer’s net profit dropped from $136 million in 2012 to $129 million in 2013 as weak consumer confidence and online retail combined to decrease foot traffic and revenue in Myer’s stores.

While there are green shoots for a revival in 2014, the retail landscape has permanently changed with Internet retail posing an ongoing threat to traditional bricks and mortar stores. Myer is tipped to grow its dividend payout to 19 cents per share in 2014, this will put the company on a grossed up yield over 10% when franking credits are taken into consideration.

NRW Holdings (ASX: NWH), 7.0% yield (10% grossed up): NRW Holdings is a civil and mining services company operating primarily in Western Australia’s iron ore market. It is attempting to expand into Queensland by providing services to the troubled coal sector and also oil and gas in WA.

The company confirmed during its AGM a week ago that it had not experienced the same drop off in contracts as some of its rivals and expects to hit full-year profit and revenue guidance. The share price has pulled back sharply since mid-September, which has pushed the forecast dividend yield up above 7%. There is a possibility that the company will surprise with earnings and profit above guidance and deliver a bigger dividend payout.

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Motley Fool contributor Andrew Mudie owns shares in NRW Holdings.

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